Ch 4 - Getting wine to POS (free market) Flashcards
Getting wine to POS - free market
Three main points for this chapter?
Summary
○ Producers must select methods to move wine from production to consumers efficiently and profitably
○ Choices depend on type of market (free vs regulated), sales channel (on- vs off-trade), producer resources
○ Many producers use a mix of methods to reduce risk and expand market reach
Getting wine to POS - free market
What is a free market?
background
○ Producers relatively free to choose whether to sell DTC/retailer or thru intermediary; able to cancel intermediary contracts/find new partners
○ Very few markets totally free - govn’t intervention - taxes, distribution and sales control
Getting wine to POS - free market
What are main categories of wine retail sector?
background
- Retail - off-premises/off-trade
- Hospitality - on premises/on-trade
- includes HoReCa - Hotels, restaurants and cafes/catering
Getting wine to POS - free market
What are the 5 key choices for producers to get product to POS in free market?
background
- Direct to retail
- Distributor
- Establish a JV
- Use a broker
- DTC
Getting wine to POS - free market
What are 4 factors that influence producer choice of whether to sell direct to retail or use distributor?
NVWA worksheet
- Managing brand image
- Managing administration
- Managing buyer relationships
- Resources (labor, time, resources, etc)
use these 4 to assess adv/disadv of each option
Getting wine to POS - free market
What are adv of selling direct to retail?
What are disadv?
What are some add’l considerations?
Adv
* avoid intermediary costs
* control over brand image - producers choose which retailers sell their produce and how marketed
* Can reduce admin/costs by selling thru fewer, larger retailers - usually bigger producers
Disadv
* Burden of getting wine to retailer bourne by producer - time, staff, expense
- transport, import duties, legal/compl (labeling)
- freight forwarder can offset, but adds cost
* Producer assumes risk of spoilage/damage in transit - can be offset by freight forwarder
* Foreign markets req add’l time/expertise to build presence
* Harder to manage large number of retailers for smaller producers
Considerations
* Can sell En Primeur - cash flow sooner, but less pft
* For larger prod - bulk shipping can allow high vol prod to sell to larger retailer while keeping P low
Getting wine to POS - free market
What is a distributor and aka?
Whare are key attributes of distributors?
What are adv/disadv?
Buys wine from a range of producers and sells to range of retailers
Aka - importer, agent, wholesaler
Key features:
○ Charge fee - hospitality sector tends to be higher - more costs/staff
○ Distrib usually take over marketing, portfolio approach
○ Key to choose right distrib -> prod w/ multiple wines can choose diff distrib
○ Larger distrib prefer larger retailers, there are distrib that specialize in small
○ Generally located in same country as retailers (may not be same as prod)
○ Might/might not hold stock of prod and might/might not have exclusive import/distrib rights in market
Adv
§ Access to distrib market knowledge, networks, market insights - simplify new market entry - client list, knows retailer requirements
§ Reduce admin burden for producer - collection/transport/delivery, assume transport risk, importation facilitation, language barriers
§ Improved access/visibility as part of distrib portfolio -shared marketing resources across portfolio (portfolio tastings)
Disadv
§ Distributor fees ↓π
§ Loss of marketing/brand control and where sold - need agreed marketing strategy
§ Less attention if prod under-performs
Getting wine to POS - free market
What are joint ventures and how are they done?
Why are they done?
Adv/Disadv?
Example?
○ Relationships between prod and local companies across supply chain to manage distribution
§ share costs and inc control over those stages -> inc π
§ Partners usually comparable size, need to choose carefully to avoid conflicts - clear roles/resp
§ Trend - JVs to create new brands -
Adv
§ share costs and inc control over distribution -> inc π
§ Lower fees than distributors
Disadv
§ Contracts make it harder to chg that distrib relat
§ Success depends on partner compatibility and aligned objectives
Example
§ Mentzendorff - UK distrib w/ Champ Bollinger and Fladgate as partners
Getting wine to POS - free market
What is M&A?
How different vs JV?
Why are they done?
Adv/Disadv?
Example?
- Merger - 2 business join together to benefit from greater resources/cap - more competitive
- Acquisition - takeover of one bus by another - usually when larger buys smaller - to acq capabilities missing from buyer
- can happen at multiple parts of value chain (production, distribution) and also from outside industry - private equity
Why done
- reduce costs, fill in capability gaps, simplify/gain more control over supply chain, faster growth if buy estab brand
Adv
§ reduce costs/increase scale
§ fill in cap gaps simplify/more control over supply chain
§ faster growth (buy estab brand)
§ For small prod adv - new investment, access to new capabilities (large dist network) - but lose control
Disadv
§ Execution risk and complexity (Conviviality example) - don’t capture expected synergies/scale
Getting wine to POS - free market
What are brokers and how different vs distributors?
Key attributes and what segment most common?
What are adv and disadv?
○ Independent intermediaries who connect prods and sellers but do not handle logistics or marketing
§ deal facilitators - unlike distributors, do not represent either prod or seller
○ Bordeaux - brokers have legal status - intermediaries bet chateaux and negociants
○ Bulk shipping - broker resp to ensure correct wine delivered
○ Key role in fine wine trade - facilitating bet buyers and sellers of rare wines
Adv
§ Smaller fees (2%) vs distrib
§ Broker has specialized market and functional expertise (e.g., bulk wine sales)
□ Know what wines sellers have and what style/vol buyers want
Disadv
§ Producers keep resp for branding, sales strat and logistics
§ Brokers do not actively promote wines - limiting visibility
Getting wine to POS - free market
What is DTC?
What are 4 main DTC channels?
What are overall adv/disadv?
DTC - producers sell directly to end consumers
4 main DTC channels ○ Cellar door sales ○ Events ○ Wine clubs ○ Online
Adv
§ Prod takes full π
§ Retain full control over marketing, pricing, branding and cons experience
§ Build loyalty and product engagement
Disadv
§ Additional admin, logistics and staffing costs
Getting wine to POS - free market
What are cellar door sales?
Adv/disadv
Facilities at winery (or off-site) to sell to visitors - locals and tourists
- attracted by experience of visit - tours/tasting, storytelling
- can provide access to wines not avail/more expensive in their market
Adv (for producers)
- avoid intermediary costs
- Build brand through experience/storytelling
- build cons loyalty/WOM, feedback on new products
Disadv
- added cost of space staffing, take attention away from wine prod (some open tasting rooms in towns if far away)
Getting wine to POS - free market
What are events?
Adv/disadv?
Events such as festivals and competitions allow tastings and producers to build awareness and brand
Adv
§ Engage cons directly
§ Inc visibility - attract larger number of people
Disadv
§ Pay to exhibit and staff
§ Competing w/other producers (unlike cellar door)
Getting wine to POS - free market
What are wine clubs?
How work/where popular?
Adv/disadv?
Memberships (often fee-based) offering wine to consumers
- sometimes w/ discount and/or special access via allocation + additional bennies - free tours, events, library wines
- popular in Australia and USA - promoted at cellar door and operated by all levels of producers - some are the only way to buy
Adv (for prod)
§ Marketing benefit -known cust base - cheap engagement, build loyalty
§ Can sell large amt of production
Disadv
§ Cost to estab and run - newsletters, details about coming wines, order processing, delivery costs
§ Not all states in US allow direct sales
Getting wine to POS - free market
What is online DTC?
Adv/Disadv?
Producers offer wine to consumers online
- often in addition to other channels
Adv
§ Other than delivery, no intermediary costs - can be cheaper for cons
§ Producers can earn larger π
Disadv
§ Need to set up and manage
§ Must have quality website
